UK Intra‐industry Trade with the EU North and South

Abstract

This paper tests the traditional country and industry hypotheses of intra‐industry trade (IIT) in vertically and horizontally differentiated products in the context of the UK’s bilateral trade with EU countries. It distinguishes empirically between IIT in vertically and horizontally differential goods, between trade with EU ‘North’ and ‘South’ and between the effects of using GDP proxies and direct measures of national factor endowment differences. The paper shows that the robustness of the results of earlier multi‐country studies are open to challenge, that the separation of IIT into vertical and horizontal IIT offers an important innovation to the empirical work in this area and that further development of large numbers models of IIT in quality differentiated goods is required.